US oil exports boom, putting infrastructure to the test

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Updated 30 October 2017
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US oil exports boom, putting infrastructure to the test

NEW YORK/HOUSTON: Tankers carrying record levels of crude are leaving in droves from Texas and Louisiana ports, and more growth in the fledgling US oil export market may before long test the limits of infrastructure like pipelines, dock space and ship traffic.
US crude exports have boomed since the decades-old ban was lifted less than two years ago, with shipments recently hitting a record of 2 million barrels a day. But shippers and traders fear the rising trend is not sustainable, and if limits are hit, it could pressure the price of US oil.
How much crude the United States can export is a mystery. Most terminal operators and companies will not disclose capacity, and federal agencies like the US Energy Department do not track it. Still, oil export infrastructure will probably need further investment in coming years. Bottlenecks would hit not only storage and loading capacity, but also factors such as pipeline connectivity and shipping traffic.
Analysts believe operators will start to run into bottlenecks if exports rise to 3.5 million to 4 million barrels a day. RBC Capital analysts put the figure lower, around 3.2 million bpd.
The United States has not come close to that yet. A total of the highest loading days across Houston, Port Arthur, Corpus Christi and St. James/New Orleans — the primary places where crude can be exported — comes to about 3.2 million bpd, according to Kpler, a cargo tracking service.
But with total US crude production currently at 9.5 million barrels a day and expected to add 800,000 to 1 million bpd annually, export capacity could be tested before long. Over the past four weeks, exports averaged 1.7 million bpd, more than triple a year earlier.
“Right now, there seems to be a little more wiggle room for export levels,” said Michael Cohen, head of energy markets research at Barclays.
“Two to three years down the road, if US production continues to grow like current levels, the market will eventually signal that more infrastructure is needed. But I don’t think a lot of those plans are in place right now.”
If exports do hit a bottleneck, it would put a ceiling on how much oil shippers get out of the country. Growing domestic oil production and limited export avenues could sink US crude prices.
Shippers have booked vessels to go overseas in recent weeks because the premium for global benchmark Brent crude widened to as much as $7 a barrel over US crude , making exports more profitable for domestic producers.
Export Plans
Exports could hit 4 million bpd by 2022, an Enterprise Products Partners LP executive told an industry event in Singapore recently.
Though some operators are already eyeing expansion plans, there are limitations, said Carlin Conner, chief executive at SemGroup Corp, which owns the Houston Fuel Oil Terminal. SemGroup has three docks for exporting crude and is building additional ones.
“There aren’t very many terminals with the needed pipeline capabilities, tank farm capacity and proper docks to load the ships ... Adding this is expensive and not done easily. So there are limitations to unfettered export access,” he said.
For instance, exports are expected to start from the Louisiana Offshore Oil Port (LOOP) in early 2018 at around one supertanker a month, according to two sources. The LOOP is potentially a key locale for exports. Its location 18 miles (29 km) offshore means it can handle larger vessels than other, shallower ship channels.
While LOOP can load around 40,000 barrels per hour, operating at that capacity is not likely because that same pipe is used to offload imports, the sources added. LOOP did not respond to a request for comment.
In Houston, when looking at the top 30 loading days, crude exports averaged 700,000 bpd, Kpler added. That includes Enterprise’s Houston terminal, among the largest of the export facilities, that had 615,000 bpd.
Other terminal operators are also developing additional facilities. NuStar Energy LP currently can load between 500,000 to 600,000 bpd at its two docks in Corpus Christi, which has about 1 million in capacity, according to a port spokesman. NuStar is developing a third dock, which should come online either late first quarter or early second quarter.
In Houston, Magellan Midstream Partners LP is planning a new 45-foot draft Aframax dock for mid-2018. Aframax vessels can carry about 500,000 to 700,000 barrels of crude.


Merkel seeks united front with China amid Trump trade fears

Updated 22 May 2018
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Merkel seeks united front with China amid Trump trade fears

  • Merkel seeks common ground to ward off trade war
  • Plans complicated by US policy moves

Chancellor Angela Merkel visits China on Thursday, seeking to close ranks with the world’s biggest exporting nation as US President Donald Trump shakes up explosive issues from trade to Iran’s nuclear deal.

Finding a common strategy to ward off a trade war and keep markets open will be Merkel’s priority when she meets with President Xi Jinping, as Washington brandishes the threat of imposing punitive tariffs on aluminum and steel imports.

“Both countries are in agreement that open markets and rules-based world trade are necessary. That’s the main focus of this trip,” Merkel’s spokeswoman Martina Fietz said in Berlin on Friday.

But closing ranks with Beijing against Washington risks being complicated by Saturday’s deal between China and the US to hold off tit-for-tat trade measures.

China’s economic health can only benefit Germany as the Asian giant is a big buyer of Made in Germany. But a deal between the US and China effectively leaves Berlin as the main target of Trump’s campaign against foreign imports that he claims harm US national security.

The US leader had already singled Germany out for criticism, saying it had “taken advantage” of the US by spending less than Washington on NATO.

Underlining what is at stake, French Economy Minister Bruno Le Maire warned the US-China deal may come “at the expense of Europe if Europe is not capable of showing a firm hand.”

Nevertheless, Merkel can look to her carefully nurtured relationship with China over her 12 years as chancellor.

No Western leader has visited Beijing as often as Merkel, who will be undertaking her eleventh trip to the country.

In China, she is viewed not only as the main point of contact for Europe, but, crucially, also as a reliable interlocutor — an antithesis of the mercurial Trump.

Devoting her weekly podcast to her visit, Merkel stressed that Beijing and Berlin “are both committed to the rules of the WTO” (World Trade Organization) and want to “strengthen multilateralism.”

But she also underlined that she will press home Germany’s longstanding quest for reciprocity in market access as well as the respect of intellectual property.

Ahead of her visit, Beijing fired off a rare salvo of criticism.

China’s envoy to Germany, Shi Mingde, pointed to a “protectionist trend in Germany,” as he complained about toughened rules protecting German companies from foreign takeovers.

Only 0.3 percent of foreign investors in Germany stem from China while German firms have put in €80 billion in the Asian giant over the last three decades, he told Stuttgarter Nachrichten.

“Economic exchange cannot work as a one-way street,” he warned.

Meanwhile, looming over the battle on the trade front is another equally thorny issue — the historic Iran nuclear deal, which risks falling apart after Trump pulled the US out.

Tehran has demanded that Europe keeps the deal going by continuing economic cooperation, but the US has warned European firms of sanctions if they fail to pull out of Iran.

Merkel “hopes that China can help save the atomic deal that the US has unilaterally ditched,” said Die Welt daily.

“Because only the giant emerging economy can buy enough raw materials from Iran to give the Mullah regime an incentive to at least officially continue to not build a nuclear weapon.”